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Real Capital Analytics Reveals Top Markets for Self-Storage Acquisition, Construction Activity

Article-Real Capital Analytics Reveals Top Markets for Self-Storage Acquisition, Construction Activity

Real Capital Analytics Inc. (RCA), a firm that provides data on the commercial real estate investment markets, has published lists identifying the top 10 U.S. markets for self-storage acquisition and construction activity. The lists are part of an “RCA Insights” report summary of the self-storage sector.

The top market targeted for self-storage construction is Northern New Jersey, having attracted $294 million in the 12 months ending June 30. New York City (NYC), at $262 million, ranked second, followed by Orlando ($199 million), Dallas ($190 million) and Phoenix ($163 million).

Detroit ranked No. 1 for acquisition markets during the same period, with $391 million in activity. Houston ranked second at $362 million, followed by NYC ($287 million), Boston ($263 million) and Miami/Dade County, Fla. ($182 million). Overall, individual asset and portfolio sales reached a record $1.8 billion in the second quarter.

Houston, Miami/Dade County and NYC were in the top 10 of both lists, with Miami/Dade ($120 million) and Houston ($109 million) ranking eighth and 10th, respectively, on the construction-market list.

The report also highlights trends related to institutional investment, capitalization rates and market compression. The summary is an excerpt from a longer analysis of the U.S. self-storage market published as part of “US Capital Trends,” an RCA publication examining commercial real estate activity.

Based in NYC, RCA is privately held company, with additional offices in London and Singapore as well as San Jose, Calif.

Source:
Real Capital Analytics, Spotlight on the US Self Storage Sector

Founder of Self-Storage REIT Public Storage Revealed as ‘Secret’ USC Mega-Donor

Article-Founder of Self-Storage REIT Public Storage Revealed as ‘Secret’ USC Mega-Donor

Billionaire B. Wayne Hughes Sr., the co-founder of publicly traded self-storage real estate investment trust (REIT) Public Storage Inc., is believed to have donated about $400 million to the University of Southern California (USC) in his lifetime, with most of the money being given anonymously. Between 2010 and 2015, Hughes donated $360 million to his alma mater, with almost no public recognition, according to a recent investigative report by the “Los Angeles Times.”

The contributions, most of which have been given to the athletic department, make Hughes, 85, the Trojans No. 1 booster. His influence has included mentoring football stars who became longtime friends such as Marcus Allen, Rodney Peete, O.J. Simpson and Lynn Swann. The report includes details regarding his relationships with Swann, USC’s current athletic director, and Simpson, who he reportedly assisted with court strategy behind the scenes when Simpson was tried for the murders of his ex-wife, Nicole Brown Simpson, and her friend, Ronald Goldman.

Neither Hughes nor his relatives spoke to the “Times” for the article. In response to an interview request, which included an information summary, Hughes’ attorney Dawn Eyerly told the newspaper the material was “replete with many inaccuracies and mischaracterizations of his relationships,” but didn’t specify. Hughes “has intentionally chosen to live his life in a way that he avoids the spotlight,” Eyerly said in declining the interview. The entrepreneur has reportedly told associates that publicizing charitable work diminishes its impact.

Born during the Great Depression, Hughes migrated with his family to Southern California to escape the Oklahoma Dust Bowl. He received a scholarship to study business at USC during the 1950s. He launched his own real estate firm in the early 1970s, around the time he met land developer Kenneth Volk Jr.

During a trip to Houston, Volk visited an independently owned self-storage facility posing as a customer and was told there was a waiting list. Intrigued by the business, he told Hughes about the facility, and by 1972, the men had partnered and opened their first Public Storage location in El Cajon, Calif.

Though Hughes’ original vision was to build self-storage as a way to generate income until the property became attractive for other types of development, he and Volk quickly recognized how lucrative the business model could be. Offering limited partnerships to the public allowed the company to scale faster than competitors, according to the report.

By 1990, Public Storage was the nation’s largest self-storage operator, a position it still holds. Kenneth Woolley, who founded Extra Space Storage Inc., a competing self-storage REIT and third-party management firm, worked for Hughes in the 1980s. Woolley told the “Times” that Hughes was a business genius. “I’ve never met anyone as smart or creative,” he said.

In addition to sizable donations to USC, Hughes launched a charitable foundation in 1997 that today focuses on funding pediatric cancer research. The entrepreneur and his second wife, Kathleen Becker, lost their only child, 8-year-old son Parker, to leukemia in 1998. Hughes and his family have contributed more than $70 million to the foundation, according to tax filings.

Hughes has also supported the charitable efforts of former USC athletes, including Peete and his wife, actress Holly Robinson, who founded a nonprofit that provides aid to families affected by autism and Parkinson’s disease. In 2006, the Hughes Family donated $165,000 to Swann’s bid to be elected governor of Pennsylvania, according to the report.

Hughes stepped down as chairman of Public Storage in 2011, but the family retains 14 percent of the company, the “Times” reported. Hughes daughter, Tamara Hughes Gustavson, is the REIT’s largest shareholder and sits on the executive committee of USC’s governing board. She and her brother, B. Wayne Jr., are USC alumni.

Hughes also has interests in horseracing. In 2004, he acquired Spendthrift Farm in Lexington, Ky., where he spends much of his time with his third wife, Patricia Whitcraft, whom he married in 2017.

Despite his wealth, Hughes is known to be unassuming, even celebrating horseracing wins at In-N-Out Burger, the “Times” reported. Former USC President C.L. Max Nikias called Hughes “a man of impeccable character, loyal to his family and his philanthropic causes. He is a devoted Trojan.”

Based in Glendale, Calif., Public Storage has interests in 2,444 self-storage facilities in 38 states, with approximately 164 million net rentable square feet. Operating under the Shurgard brand name, the company also has 231 facilities in seven European countries, with approximately 13 million net rentable square feet.

Source:
Los Angeles Times, This Secret Donor Has Given USC $400 Million

Perfecting Your Customer Touchpoints for a Great Self-Storage Experience

Article-Perfecting Your Customer Touchpoints for a Great Self-Storage Experience

The self-storage business is extremely unique in that most of our customers are in a state of flux and may be stressed out. It’s said that the process of moving is one of the top 10 stressful situations people experience in their lifetimes. So, while other businesses might get a customer who’s rational, allowing them to design their service experience around logical behavior, in storage, we need to be prepared for anything.

Regardless of where our customers communicate with us and their mental state when they do so, we must consider how to make all interactions convenient and user-friendly. In fact, there are many potential touchpoints between a customer and a self-storage brand—places where a person might find and connect with us, even before he’s ready to rent space.

Where and How We Connect

The way we market and advertise has changed dramatically over the last 10 years, and we rely much more on technology. Sometimes, technology allows us to operate with less staff and have fewer personal interactions with customers; but it doesn’t always make the rental process easier.

To ensure the quality of our customer experience, we must regularly survey and monitor the interactions customers have with our business online, through the call center, at the kiosk, and with employees in the office. We must also train staff to maintain customer satisfaction through all touchpoints. These might include:

  • Web search
  • Online business listings
  • Facility website
  • Social media platforms
  • Online review sites
  • Facility phone or voicemail
  • Call center
  • E-mail
  • Chat
  • Text
  • Drive-by
  • Office visit
  • Advertising (digital or print)
  • Community event
  • Interaction with manager at the bank, store, etc.

Any place a customer might discover and learn about your company is a touchpoint. Once he’s found you, many things might happen. You want to be conscious of and improve his experience during these moments and others:

  • First impression
  • Inquiry
  • Property visit/tour
  • Rental process
  • Move-in
  • Retail purchase
  • Gate operation
  • Truck use/rental
  • Payment or account inquiry
  • Customer-service issue (i.e., late fee, gate/code problem, door problem, lights not working, conflict with an employee or another tenant, etc.)
  • Referral
  • Move-out

An Example

Car companies spend an unbelievable amount to produce their products. In fact, BMW spent $800 million to produce its new 7 Series. However, that level of investment doesn’t always translate into the sales experience with the customer. If you’re selling a luxury automobile, shouldn’t the buying experience be every bit as great as the car?

In the case of BMW, there were more than 100 messages to communicate to customers about the new vehicle but only a few ways to deliver them. The company’s major touchpoints are its website, media (print and digital) and its dealerships.

BMW realized that many of the car’s features wouldn’t be revealed to the customer until the sale process. Sales staff were given a checklist and would literally mark each box as they guided the customer through the options, some of which required set-up. The problem was buyers couldn’t wait to get the car on the road and escape the dealership! The feeling of being stuck was stressful and more frustrating than they wanted during an already lengthy and taxing car-buying experience.

The company finally decided to reach out to customers two weeks after each sale and invite them back to the dealership to get answers to any questions they might have about their new car. People were much more responsive to that touchpoint because they weren’t so anxious. Customers later valued and were happier with the technical help than during the buying process.

Plan to Impress

There’s a quote from Maya Angelou that really speaks to the heart of the customer-experience concept: “I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.”

Self-storage owners spend a lot of time and money in designing their properties, but they often invest very little in finding and training friendly employees and giving the customer a wonderful rental experience. If we know customers are going to be frazzled when they interact with us, our goal should be to make each touchpoint fast, friendly and simple. For example, when they visit our sites, we should offer soothing music, places to sit, free cold water, and a positive, quick rental process. They should be surprised and amazed at how friendly our managers are and how easy move-in is.

To accomplish this high level of customer satisfaction, you must plan to impress. Hire people with good service skills, educate your employees through training, measure your results and gather positive feedback. Consider all your customer touchpoints and make each one count.

Carol Mixon-Krendl is the owner of SkilCheck Services Inc., which provides self-storage auditing, mystery shopping, development and operations consultation, and sales training. She’s managed more than 30 storage locations in the West and is a frequent speaker at industry tradeshows. She’s also written more than 100 articles for various publications and has served on state and national self-storage association boards. For more information, call 800.374.7545; e-mail [email protected]; visit www.skilcheck.com.

A Preventive Maintenance Plan for Your Self-Storage Security System

Article-A Preventive Maintenance Plan for Your Self-Storage Security System

It’s a busy day at your self-storage facility. Two new customers have arrived to finalize their online reservations, and a third just walked in and requested a tour. Plus, the phone has been ringing all morning with inquiries about your latest promotion. These are the days operators love!

Unfortunately, today is about to become a nightmare. Amid the swarm of prospective tenants, a call alerts you to a problem with the front gate. It’s stuck halfway, and there’s a line of cars on either side trying to pass. Everything in the office must be put on hold so you can deal with this emergency. You call in a technician, who finds rocks lodged in the gate track.

Luckily, you can avoid a scenario like this one by performing some simple preventive maintenance. While many repairs and tasks are better left to a professional, there are several routine checks that can be performed by onsite staff to keep security equipment working smoothly. Below are some steps, organized by component. It’ll be up to each individual to determine his skill and comfort level and decide what falls under “do-it-yourself” and what should be left to a tech.

Door Alarms and Latches

If your facility has individual unit alarms, regularly check the doors to ensure the alarm and magnet haven’t been lost, removed or tampered with. Check roll-up doors for failing or flat rubber, as this may cause misalignment that can trigger false alarms or malfunction. Many alarms have user-serviceable/replaceable batteries. Depending on your facility-management software, there might be a low-battery report you can run to identify problem sensors.

Also, test the functionality of your door latches. Open, close or slide any moving parts to check for resistance or sticking. For overlocks, make sure corresponding keys fit all the way into the keyhole without obstruction.

Keypads

Keep keypads clean and free of spiderwebs, dust and other debris, and check often to ensure each key works properly. Watch for any that are hard to push or seem too loose. Each should register on the screen when pressed. One suggestion is to create a test code with all 10 digits. Perform your test, and then clear the code from the system to prevent unwanted access via fishing.

If your facility is in an area where temperatures fall below freezing, there are heaters that can be added to keys. Anti-freeze sprays are also available.

Any maintenance that involves opening the keypad housing is often best left to a service professional. Check with your vendor for recommendations.

Cameras and DVRs

The big one here is to make sure camera lenses are clean. Keep them free of dirt, dust and spiderwebs, wiping them monthly, if not weekly. If your facility is unpaved or offers vehicle storage (e.g., lots of dirt in the air), more frequent upkeep will likely be necessary.

Routinely cleaning your lenses will make a huge difference in nighttime visibility, especially if you’re using infrared “night sight” cameras. Dust will catch the light from the emitters (behind the lens) and reflect it, creating a blurry, snow-blind effect.

Insects and spiderwebs can also cause issues with camera focus, and they’re likely to blame if you notice your digital video recorder (DVR) logging an unusual amount of blank footage. Bugs crawling across the lens can cause a camera to detect motion when there’s no actual human activity, triggering unnecessary recording. All that blank tape makes finding incidents more difficult and fills up the hard drive faster, creating shorter storage retention.

Checking your cameras for other pesky “false motion” triggers should be part of your prevention plan. Branches, leaves or anything else that might move in the breeze, or even traffic on a busy street, can cause the DVR to record more than needed. Clean up camera views as you’re able by trimming trees and bushes. What can’t be physically removed or altered can often be remedied by “masking” those problems in your DVR software, so the recorder will ignore motion in those limited areas. Clearing problem items and masking can greatly increase your storage capacity and significantly reduce the amount of irrelevant footage.

Gates

When it comes to self-storage access control, your gates and motors carry the lion’s share of the work. Frequent inspection are crucial to keeping them strong and operational. Run the gate through an open/close cycle and perform a visual and auditory check at least once a week. Watching and listening closely can tell you a lot about the health of your gate. Points to inspect include:

Chain tension and lubrication. A chain that’s dragging on the ground can collect dirt and other debris that could become lodged in the gears, causing the gate to stick or, worse, motor failure. Ensure the chain doesn’t droop excessively.

Lubricating is fairly easy but must be performed with chain lubricant only. This can be found at your local gate motor-supply store, or even auto- and bike-parts stores. Simply remove the motor cover to expose the main gears, then run the gate through a regular open/close cycle. Spray the lube on the chain and gears, allowing the cycle to bring the chain to you.

Signs of rubbing or straining. Listen for sounds of wheel strain or rubbing. Any squeaking could be an indicator of failing wheel bearings, which can cause extra strain on the motor and lead to overheating, wear, damage and possible failure. The state of the bearings can make the motor’s job easy or nearly impossible.

Also check that the motor isn’t straining. If it seems to be overworking, confirm with the manufacturer that your motor is rated for the weight of the gate.

Rollers and track. Examine guide rollers for signs of wear and the gate track (in front of and behind the gate motor) for debris, dirt, rocks or anything else that may interfere with operation. The track can be easily swept with a stiff broom, or you may opt to install a sliding-gate brush kit to do the work for you every time the gate opens and closes.

A Maintenance Schedule

Developing a schedule for preventive maintenance can help ensure your security equipment is fully functional at all times. Be aware of issues before they catch you off guard. Create a realistic timetable that meets the size, traffic volume and unique needs of your individual facility. You may even want to schedule a visit from one or more service technicians to walk the property with you and provide insight. Depending on your facility-management software, you can even set maintenance reminders. For example, you might receive a notification to check the cameras on Building A for cobwebs every Tuesday.

When to Call a Pro

It never hurts to call a professional! Any technician will tell you that many complex service calls could’ve been remedied in less time and with less expense if the self-storage operator had called him in the first place. Any time you feel out of your depth or there’s any doubt about what to do, bring in a pro. Depending on your aptitude and experience, the company may be able to offer suggestions over the phone before a tech visits your property.

Taking small steps to maintain your security equipment will pay off in the end. You’ll be less likely to be interrupted with emergencies and receive fewer tenant complaints. Finally, you’ll have a system that functions properly if a security event occurs.

Sarah McDougall is a marketing assistant for QuikStor Security & Software, which provides management software, access keypads, wireless alarms, video surveillance, website design and digital marketing to the self-storage industry. Using her background in marketing and graphic design, she collaborates with clients to develop and execute digital-marketing strategies to help their businesses grow. For more information, call 800.321.1987; e-mail [email protected]; visit www.quikstor.com.

Northern Ireland Self-Storage Operator StoreStuff Celebrates Opening With Concert, Fundraiser

Article-Northern Ireland Self-Storage Operator StoreStuff Celebrates Opening With Concert, Fundraiser

StoreStuff Ltd. is celebrating its grand opening in Portadown, County Armagh, Northern Ireland this month by hosting a fundraiser as well as a concert by Irish singer Daniel O’Donnell. The free event, 5-7 p.m. on Sept. 21, will be held at the self-storage facility in the Brownstown Business Park. Money will be raised for local charities, and O’Donnell is scheduled to appear at 5 p.m. Refreshments and family-friendly activities, including bouncy castles and sumo suits, will be provided.

“We’re delighted to welcome Daniel along to our family-fun event and to open our new self storage facility in Portadown,” said Gavin Shields, managing director of StoreStuff, who’s married to O’Donnell’s daughter, Siobhan. “We will be raising funds for superb local charities that are focused on helping our local community.”

StoreStuff is expecting a large turnout. When the O’Donnell concert was announced by a local newspaper, it became a trending topic on social media, the source reported.

StoreStuff will officially open Sept. 18. In addition to Portadown, the self-storage facility will serve the communities of Armagh, Belfast, Craigavon, Dungannon and Lurgan. The property on Brownstown Road features video surveillance and individual unit alarms.

Source:
Portadown Times, Large Crowds Expected at Free Daniel O’Donnell Concert

Sacramento, CA, Officials Consider Self-Storage Ban Along Stockton Boulevard Corridor

Article-Sacramento, CA, Officials Consider Self-Storage Ban Along Stockton Boulevard Corridor

The Sacramento, Calif., Law and Legislation Committee voted unanimously this week to forward a proposal to the city council that would ban auto-service and self-storage businesses along the Stockton Boulevard corridor where it intersects with Broadway. The council is expected to review the proposal this month, according to the source.

If passed, auto repair and self-storage would be added to an ordinance that already bans new check-cashing outlets, liquor stores and towing yards from being built in the area. The ordinance is part of the city’s goal to clear way for more housing and “transit-friendly” development along the corridor, according to councilmember Eric Guerra, who proposed expanding the measure after a storage facility was approved by city planners earlier this year.

The proposal applies to the east and west sides of Broadway and Stockton from 2nd Avenue to 65th Street, an area known as the Broadway Stockton Special District. Existing businesses wouldn’t be impacted.

“Most of the land owners, they own small lots," Guerra told the source. “It’s more about being able to connect them to something that’s different than what they’ve been familiar with, like strip malls and junk yards and tire shops. They're not used to building housing; that's an entirely new beast.”

The affected area is in the vicinity of Aggie Square, a planned satellite campus by the University of California, Davis. The California Department of Transportation launched a redesign study for the Stockton corridor earlier this year. The study is expected to be complete next summer, the source reported.

Source:
Sacramento Business Journal, City Considers Ban on Auto Shops, Storage Businesses on Stockton and Broadway

ISS Blog

3 Walls and a Door: My Journey to the Self-Storage Industry

Article-3 Walls and a Door: My Journey to the Self-Storage Industry

I’m not sure if anyone graduates from high school or college and says, “I know what I’m going to do, and I can hardly wait … self-storage!” (Unless, of course, it’s the family business.) It certainly wasn’t what I thought when considering my future once upon a time.

Like many young people, I attended college and took courses related to a variety of possible careers—psychology, business, criminal justice and others. I soon decided I preferred to work and make money then go to school full-time, so I began taking night classes. I was a hard worker and determined, which led me to graduate from the “college of experience” rather than an accredited university.

My first stop in the business world was in finance. I worked my way up the ladder in banking, but I didn’t enjoy the industry. I then landed in management at several top newspapers in various states.

When I became a mom, my path changed again. I wanted to work at home and raise our son, so my husband and I started a management company for vacation properties. It grew and did very well. Once our son was in middle school, we sold that venture, and I was ready to get out in the career world again.

By this time, newspapers were struggling to survive, so that old path was a dead end. I researched the industries that were thriving and had a positive future. That’s when I discovered self-storage. At the time, the only thing I knew about the service was from the consumer side. We had used it so much through the years and spent so much money on storage that I thought we should just buy a facility!

As I learned more about the industry, I discovered it had many similarities to property management. In fact, my husband and I would often say, “Wouldn’t it be great to just own and then rent out three walls and a door instead?” We understood the need for storage and the profitability, but not all the inner workings.

My first foray into self-storage was as an area manager in San Diego County. I enjoyed every minute of it, from the crazy tenants and long hours, to training and mentoring managers, and everything in between.

Then we decided to move from San Diego back to our first love—the mountains. We started another vacation-property management company. What can I say? We’re gluttons for punishment. It was then I realized how much I loved and missed the self-storage industry as well as my former employees and tenants. So, guess what? I’m back, but as a consultant this time! In addition to training managers, I’m auditing facilities and providing guidance to owners. I won’t be leaving the industry again!

If you’re thinking about jumping into self-storage, I strongly recommend it. No matter what role you pursue, it’ll be the best career decision you can make. It may be just “three walls and a door,” but there’s a lot that goes into making it successful. From every aspect, it’s a thriving and exciting business, and likely to stay that way.

Jenny Mead is a consultant for Haviland Storage Services, a provider of audits, third-party property management, training and more. She has years of experience as a business owner and manager in other industries including newspapers and nonprofits. She was formerly an area manager for San Diego Self Storage. For more information, call 760.401.0297; e-mail [email protected]; visit www.havilandstorageservices.com.

England Self-Storage Operator My Secure Receives Investment from Venturian Funding

Article-England Self-Storage Operator My Secure Receives Investment from Venturian Funding

England-based My Secure Self Store has received a six-figure investment from Venturian Funding & Investment Group, a family-owned private-capital firm, which it used to build its first self-storage facility. Ongoing capital infusions from Venturian will fuel company expansion, according to the source.

“This has not been a conventional investment in many ways,” Paul Halliday, an investment director at Venturian, told the source. “However, we are pleased to be involved with My Secure from the outset and to support the business using the different parts of our investment business.”

The self-storage operator’s inaugural property on Birds Royd Lane in Brighouse, England, will function using mostly shipping containers, with units ranging from 16 to 160 square feet. Scheduled to open this month, the facility will be protected via access control, surveillance cameras and 24-hour onsite security.

Halliday believes My Secure’s security-focused business model will resonate with customers and allow it to grow quickly. “My Secure’s plan is clear for the next few years, and we see that it’s concept has some exciting differences to the usual storage models,” he said.

Founded in 2015, Venturian offers equity and property investment as well as secured lending. It has interests in commercial and office space as well as industrial warehousing, according to its website.

Source:
The Business Desk, New Entrant to Self-Storage Market Secures Six-Figure Investment

G5 Releases ‘Self Storage Digital State of the Industry Report’ for the Second Half of 2019

Article-G5 Releases ‘Self Storage Digital State of the Industry Report’ for the Second Half of 2019

G5, provider of Digital Experience Management (DXM) software and marketing services to the self-storage industry, has released its “Self Storage Digital State of the Industry Report” for the second half of 2019. The 32-page publication examines industry marketing trends and includes recommendations on how facility operators can optimize their digital efforts to overcome challenges such as oversupply and increased competition, according to a press release.

The report includes overviews of specific market drivers such as state-to-state migration and national vs. submarket rental trends. It also examines advertising and marketing costs, the types of devices prospects are using to conduct online searches, online customer reviews, and factors that affect the customer experience including page-load speed, local influencers, voice search and others. There’s also a section on compliance issues.

Online lease adoption has more than doubled since the first half of 2018, while national rent growth declined 1 percent year over year due to oversaturation. The report also notes that nearly 20 lawsuits related to website accessibility were brought before federal courtrooms last year.

The “Digital State of the Industry Report,” is available as a free PDF download. G5 publishes two such reports each year.

Founded in 2005 and based in Bend, Ore., G5 is a predictive, software-as-a-service (SaaS) company that uses artificial intelligence and other technologies to measure and increase marketing-campaign effectiveness. Through its cloud platform, the company offers predictive analytics, one-to-one customer journeys, personalized customer experiences and continuous spend optimization.

Source:

G5, Digital State of the Industry Report

Finding Your Prince: Deciding Whether to Buy or Build Your Next Self-Storage Facility

Article-Finding Your Prince: Deciding Whether to Buy or Build Your Next Self-Storage Facility

Self-storage investing a lot like courting. Whether you choose to buy or build a facility, you may have to kiss a lot of frogs before you find your prince. To help you think this through, let’s look at some basic pros and cons and see how the options stack up.

Buying a Self-Storage Facility

On the positive side, acquiring an existing facility is kind of like dating an ex: You more or less know what you’re going to get. Everything you need to understand about the property—customer base, operating expenses, rent, property taxes, etc.—is there in black and white. Of course, you need to verify the data; but overall, you’re dealing with a known quantity. Therefore, a purchase is simpler, less risky and less daunting than building. In addition:

  • You don’t need as much industry expertise or business acumen to buy a facility as you do to develop one.
  • Buying may be much faster than building, if you can find a good deal.
  • You may be able to change an existing self-storage facility (unlike your ex). You can possibly make improvements to rental rates, security, marketing, landscaping, technology, etc., to make the property more profitable. You might even be able to expand.

On the other hand, every self-storage property has its challenges. It’s up to you to figure out what they are. Here are some common drawbacks to buying:

  • If you don’t catch deferred maintenance during inspection, you could be hit with a lot of unexpected costs. You’re buying someone else’s problems, including site limitations you can’t fix and problem tenants you’ll have to fix.
  • You may not be able to buy your “dream facility” in a “perfect” primary market, particularly if you can’t compete with the biggest players. This is a pretty easy one to get over. I doubt you’re married to George Clooney or Scarlett Johansson either!
  • Your return on investment is lower overall because you must pay fair market value. Remember, you aren’t just buying a building and the land on which it sits; you’re buying a revenue-generating business.
  • Though you may be able to avoid increased property taxes by buying the property’s business entity, you may not. Know what the new property taxes will be before you buy.
  • Expansion may be logistically impossible or cost-prohibitive. If it’s necessary to reach your desired rate of return, make sure your purchase agreement is contingent on zoning and permit approvals.

Building a Self-Storage Facility

First, let’s focus on the good stuff:  Building may be less expensive than buying because an acquisition involves purchasing an income stream. When you build, there’s no cash flow yet. On a similar note, all things being equal, it’s less expensive to build a class-A facility than buy one. Here are a few other pros:

  • Unlike your perfect mate, you can build your perfect facility, controlling every aspect of design and construction.
  • Right now, there are many opportunities in great locations to convert existing retail structures to self-storage.
  • Your facility will be new and, thus, more appealing than competitors. Because you’re starting from scratch, you can integrate technology and many other features that may be difficult for older properties to match.
  • You can build in phases and keep adding popular-sized units.
  • The profit to be had upon exiting the business is probably greater, depending on your market and how long you hold the facility.

Now, let’s look at some of the disadvantages to building. As with an acquisition, every development site has its challenges. Again, it’s up to you to figure out what it they are.  Here are some others:

  • Projections are just projections. Building is inherently riskier than buying.
  • Beware of design and construction mistakes. Without careful research and planning, you can make costly mistakes. There’s a scary, long list of potential pitfalls.
  • Your project will only be as good as your development team. You must carefully vet your engineer, architect, general contractor, attorney and title company. If you do your due diligence correctly, you could move this up to the pros section of the list.
  • There are going to be timeline overruns. Get over it.
  • Building is more time-consuming and labor-intensive than buying.
  • Until your facility is 90 percent occupied, it doesn’t reach its full fair market value. This may take two to three years.
  • If you decide to build in phases, there may be reasons you can’t move forward on later phases due to zoning, political or economic changes beyond your control. Your upfront investment, therefore, may not pay off.

Just Ask Her to Dance Already

This is no time to be a wallflower. Whether you think you want to buy or build, start looking at facilities for sale and learn from them. As a wise sensei once said, “In order to learn anything, first you must know yourself.” Identify your preferred business model, management approach and expected rate of return so you can objectively compare facilities or dirt for sale.

Either way, don’t get emotional about deals. Make a list of the pros and cons of each opportunity and verify everything the broker and seller tell you. Run the numbers yourself to determine the site value. Don’t just accept anyone’s word for it; the appraiser or bank sure won’t.

Other Considerations

Depending on your market of preference, the choice of whether to buy or build may be out of your hands. You may not be able to find the right property for sale or the right parcel on which to build. No matter what, you must do these four things:

  • Do your research and educate yourself about the self-storage industry and your submarket.
  • Be prepared to spend money up front that you may not get back if the purchase or parcel doesn’t pan out.
  • Get your ducks in a row to be approved for a loan and line up investors.
  • Get an independent second opinion in the form of a feasibility study before you make your final decision.

As you evaluate the options of buying vs. building, don’t be dismayed if the list of cons is longer than the list of pros. Remember your frog prince. You won’t mind that he has a few warts if, in the end, he’s a great kisser!

Katherine D’Agostino is the founder of Self-Storage Ninjas, a feasibility-analysis firm delivering unbiased reports resulting in facilities with high occupancy and the highest possible returns. She offers a free, weekly newsletter that provides insider techniques, ready-to-use calculators, downloadable spreadsheets and data sources. For more information, visit www.selfstorageninjas.com.